2013 (11) TMI 989 - AT - Central Excise

Duty demand on Clandestine Removal of polyester chips- Failed to reconcile the quantity of polyester chips Held that - Whatever be the explanation for the difference, one fact which is clear is that the quantity of polyester chips as on 31.03.96 as recorded in the Central Excise record is 605.665 MT which is more than the closing balance as on 31.03.96 mentioned in the balance sheet for 1995-96 - The assessee s duty liability is on the quantity reflected in their statutory Central Excise records and the question of an un-account clearances would arises only if the figure of production of clearances, as mentioned in the balance sheet of a particular year, is more than that reflected in the Central Excise records. The closing balance of polyester chips as on 31.03.96 recorded in the Central Excise records on which the duty is supposed to have been paid, is more than the closing balance as on 31.03.96, recorded in the balance sheet Thus, the duty demand on the difference between the balance of 605.665 MT in the Central Excise records and the balance of 570.590 MT in the balance sheet without any basis - the duty demand on alleged clandestine clearances of 35.075 polyester chips during 1995-96 is not sustainable. Duty Demand on Clandestine Removal of P.P. chip waste Held that - In the ER-5 Returns the three types of wastes were being separately reflected and the letter dt. 21.09.04 of the Range Superintendent also mentions the yarn waste, polymer waste and chip waste separately the quantities of P.P. waste are actually of polymer waste which have been duly accounted for in the Central Excise records - When the very basis for duty demand mentioned in the Show Cause Notice vanishes, the order upholding this duty demand, would not be sustainable Decided in favour of Assessee.

Issues Involved:
1. Alleged clandestine removal of 93.683 MT of P.P. Chips (waste) during 1994-95 and 1995-96.
2. Alleged failure to account for 35.075 MT of polyester chips during 1995-96.
3. Demand for duty amounting to Rs. 15,73,441/- along with interest and penalty under sections 11AB and 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Alleged clandestine removal of 93.683 MT of P.P. Chips (waste) during 1994-95 and 1995-96:
The Department alleged that the appellant did not declare the production of 93.683 MT of P.P. Chips (waste) and cleared them clandestinely. The appellant argued that the waste referred to in the Show Cause Notice as 'P.P. Chip waste' is actually polymer waste, which was duly accounted for in the Central Excise records and RT-5 Returns. The appellant contended that the Department's presumption that this waste is different from polymer waste is incorrect. The Range Superintendent's verification confirmed that the quantities of polymer waste were accounted for in the Central Excise records. The Tribunal found that the quantities referred to in the Show Cause Notice were indeed polymer waste and not P.P. Chip waste. Therefore, the demand for duty on alleged clandestine removal of 93.683 MT of P.P. Chips (waste) was not sustainable.

2. Alleged failure to account for 35.075 MT of polyester chips during 1995-96:
The Department alleged that the appellant failed to account for 35.075 MT of polyester chips, leading to a duty demand of Rs. 5,19,110/-. The appellant explained that the difference in the closing balance of polyester chips as on 31.03.96 between the Central Excise records (605.665 MT) and the balance sheet (570.590 MT) was due to moisture content. The weight recorded in the Central Excise records was of wet chips, while the balance sheet recorded moisture-free chips. The Tribunal noted that the duty liability is on the quantity reflected in the statutory Central Excise records, and the question of unaccounted clearances arises only if the production or clearance figures in the balance sheet exceed those in the Central Excise records. In this case, the closing balance in the Central Excise records was higher than in the balance sheet, indicating no clandestine removal. Thus, the duty demand of Rs. 5,19,110/- on alleged clandestine removal of 35.075 MT of polyester chips was not sustainable.

3. Demand for duty amounting to Rs. 15,73,441/- along with interest and penalty under sections 11AB and 11AC of the Central Excise Act, 1944:
The Show Cause Notice demanded duty of Rs. 15,73,441/- along with interest and penalty under sections 11AB and 11AC. The Tribunal found that both components of the duty demand (Rs. 10,54,331/- on P.P. Chip waste and Rs. 5,19,110/- on polyester chips) were not sustainable. Consequently, the associated interest and penalty were also not justified. The impugned order confirming the duty demand, interest, and penalty was set aside, and the appeal was allowed.

Conclusion:
The Tribunal concluded that the allegations of clandestine removal and failure to account for waste and chips were not substantiated. The duty demands, along with interest and penalties, were not sustainable. The appeal was allowed, and the impugned order was set aside.

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